REGULATORY & Legislative Updates
A CLOSER LOOK AT THE DEVELOPMENTS AFFECTING FIRMS
The legal and compliance landscape continues to change as courts and regulators refine expectations around supervision, accountability, and professional conduct. With changes affect areas such as delegation of work, scope of authorised activities, and compliance frameworks, firms must these developments apply to their operations and ensure that appropriate controls and oversight are in place.
The below highlights some of the most relevant regulatory changes currently affecting the sector, and the practical considerations they present:
Mazur: supervision under the spotlight
The High Court decision of Mr Justice Sheldon in Mazur v Charles Russell Speechlys LLP sent shockwaves through the legal sector, prompting firms with contentious work to review delegation models, reserved legal activities, and supervisory arrangements. The Court of Appeal’s decision clarified the extent to which reserved legal activities, particularly the conduct of litigation, may be delegated within authorised legal practices. The court confirmed that unauthorised individuals, such as paralegals and trainees, may undertake litigation-related tasks provided they do so under the direction, supervision, and control of an authorised person who retains responsibility for the work. The ruling restored confidence in long-established delegation models across the profession, but emphasised that effective supervision remains essential.
In short, supervision and delegation will be fact and individual specific, depending on experience and type of work. However, the authorised person's responsibilities remain intact. The authorised person retains the responsibility to act with independence and integrity, to maintain proper standards of work, to act in the best interests of their clients, and to comply with their duty to the court to act with independence and in the interests of justice.
The SRA recently published guidance to help firms comply with the CoA Mazur ruling, which confirmed that unauthorised staff (paralegals, trainees, and legal executives) can carry out litigation tasks as long as an authorised person provides proper direction, management, supervision, and control.
Finance Act 2026: new registration requirements
While the Finance Act 2026 came into effect on 18 May 2026, firms still have three months from this date to transition and implement the new requirements. The changes require firms to assess whether client work involving HMRC interaction brings them within tax adviser registration requirements. Residential conveyancing, where SDLT submissions are made, private client work involving estates or trusts, and matters where the firm corresponds with HMRC on a client’s tax affairs, all form part of the new requirements to register as a tax adviser. Implementation challenges for law firms require careful consideration and could include identifying in-scope services and individuals, evidencing anti-money laundering (AML) supervision, updating agent services accounts, managing transition deadlines, and preventing disruption if HMRC refuses to engage with unregistered advisers.
Transfer of AML supervision
In parallel, firms are reviewing AML control frameworks ahead of the proposed transfer of AML and counter-terrorist financing supervision to the Financial Conduct Authority (FCA). The proposed transfer may create greater consistency across sectors, but could also introduce additional data requirements, supervisory expectations, costs, and transition uncertainty.
SRA separation of management and compliance roles
The Solicitors Regulation Authority (SRA) has announced its intention to separate management and compliance roles in certain firms to strengthen consumer protection, improve internal challenges, and reduce the likelihood of further law firm failures. Under the reforms, individuals who unilaterally direct significant management decisions will be unable to hold Compliance Officer for Legal Practice (COLP) or Compliance Officer for Finance and Administration (COFA) roles.
The SRA is pushing forward with these changes to protect client money and spot emerging risks earlier, largely in response to high-profile firm collapses, such as Axiom Ince. The plans have faced significant pushback from the Law Society and the Sole Practitioners Group (SPG). Concerns have been raised that the split will increase compliance costs, burden smaller practices, and ultimately impact consumers. The draft rules are subject to final approval by the Legal Services Board (LSB), for implementation in early 2027.